Who says crime doesn’t pay? Remember Cristina Warthen (nee Schultz), the Stanford Law School grad who engaged in a little “risky business” to help pay for her student loans? Warthen reportedly grossed more than $300,000 working as a hooker in California under the name “Brazil” on her now-defunct web site, touchofbrazil.net.
As fate would have it, Warthen was never charged with prostitution but still found herself subject to criminal charges. Warthen was arrested for tax evasion as a result of her failure to report her illegal income on her tax returns.
If convicted, Warthen could have faced five years in prison and more than $100,000 in fines. However, today she reached a plea agreement in her case that resulted in no jail time. She’ll serve a year of home detention and pay more than $300,000 in back taxes, fines and penalties to the Treasury – a sum she’ll have no trouble producing now that she has married super rich David Warthen, founder of Ask Jeeves.
Warthen also received three years probation which means that she’ll have to keep her, um, nose clean.
In the agreement, Warthen admitted to hiding money from the taxing authorities including stashing cash in an old law school book. As someone who has paid hundreds of dollars to use a law school book for one semester, I personally admire her ingenuity in finding another use for the darn thing. I guess she learned something at Stanford after all.
What’s the difference between a lawyer and a prostitute?
A prostitute will stop screwing you when you’re dead.
How often is it that I can post about hookers and lawyers in the same post?
Last week, Cristina Schultz, a 2001 graduate of Stanford Law, was indicted in federal court for allegedly failing to pay income tax on money she earned as a prostitute in 2003. Yes, do the math, that’s after she graduated from law school.
This story is notable for a couple of reasons. One, it’s my favorite provision of the tax code: illegal activities are still subject to taxation. Whether it’s gambling, bribery or prostitution, you still have to pay up on your income.
The indictment alleges that Ms. Schultz worked as a prostitute based in northern California, using the name “Brazil” (how exotic). She also allegedly maintained a website, TouchofBrazil.net, on which she advertised her services, pricing, travel schedule, and other information. Through her web site, Ms. Schultz allegedly provided “services” to clients in Los Angeles, Washington DC, Manhattan, Chicago and Seattle. Ms. Schultz’ expenses for 2003, which included travel, hotel, other expenses totaled $51,920. Subtracting that amount from her income of $133,717, resulted in net income of $81,797.
Two, Ms. Schultz, pictured above, is kind of famous – by marriage. She now goes by her married name, Cristina Warthen. Her husband is David Warthen, co-founder of Ask Jeeves, now known as Ask.com; they married in 2004. He must be so proud.
Interestingly, David Warthen married Schultz after her history as a prostitute was made public. In 2004, the government investigated Schultz and filed a civil forfeiture complaint after finding more than $60,000 in cash in safe deposit boxes and her apartment. Warthen claimed the money was a gift from him (wink, wink) and a closed settlement was reached.
Now, years later, the feds have re-opened their investigation into Schultz’ affairs, resulting in the tax evasion indictment. The total tax which is allegedly owed (though not including penalty and interest) is $25,424. If Ms. Schultz’ husband is as wealthy as you’d imagine, I can’t figure out for the life of me why the two of them would not simply pay up to move this along. Having never actually been a prostitute myself, I would think that it would be an embarrassing career choice to admit to later in life – though I can also attest that I was not netting over $80k per year two years out of law school, nor have I paid off my loans (she claims to have paid off more than $300,000 in student debt from working “in the biz”). Maybe she knows something I don’t.
Ms. Schultz is scheduled to appear in court on October 16. You can follow along if you so inclined at United States v. Warthen, No. CR-08-682; the indictment is available here.
(Hat Tip: Tax Prof Blog)
